Aloha’s air cargo unit in limbo

Pilot negotiations continue

STORY SUMMARY »

Aloha Airlines and its pilots union talked into the evening yesterday as the clock ticked down on the one remaining obstacle that would prevent the company from obtaining additional financing to get it through the auction of its cargo business.

Some 85 percent of the state's air-cargo capacity is at risk in the talks between the company and the Air Line Pilots Association. Aloha also delivers all U.S. Mail to Maui and the Big Island.

Without an agreement, General Motors Acceptance Corp. Aloha's primary lender said it wouldn't provide the additional $3.5 million to $4 million Aloha needs to keep its cargo unit operating while it sets up an auction for the unit. Aloha already has a $13 million offer from Seattle-based Saltchuk Resources Inc. and interest from two other potential bidders.

Aloha attorney Jordi Guso said that Aloha doesn't have sufficient cash to operate beyond this weekend, and that it would have to shut down its cargo and aviation services divisions without additional capital.

There are still 1,450 remaining Aloha employees out of 3,500 before it shut down its passenger operations whose employment depends on the company's ability to sell those divisions. Aloha terminated 150 aviation-services workers yesterday after customer ATA Airlines abruptly shut down Wednesday night.

The fate of Aloha Airlines' remaining businesses, the jobs of 1,450 employees and the prospect of major damage to the state's economy hung in the balance yesterday as the company and its pilots union negotiated over which pilots are entitled to operate its only remaining flights: the cargo runs.

Talks continued throughout the day, and two top officials from the national Air Line Pilots Association flew in to Hawaii yesterday afternoon to assist in the negotiations. The company and the union were expected to talk into the evening to try to reach a resolution ahead of a 9:30 a.m. hearing today in federal Bankruptcy Court.

Aloha flies 85 percent of the state's air cargo, as well as delivering all U.S. Mail to Maui and the Big Island.

Without an agreement, General Motors Acceptance Corp. Aloha's primary lender said it wouldn't provide the company with the additional $3.5 million to $4 million it needs to keep its cargo unit operating while it sets up an auction for its profitable cargo business. A hearing on that auction is scheduled for April 24.

Aloha attorney Jordi Guso said that Aloha doesn't have sufficient liquidity to operate beyond this weekend and that it would have to shut down its cargo and aviation services divisions without additional capital.

With 30 cargo pilots needed to fly the schedule, senior passenger pilots who were terminated are attempting to stay employed by bumping junior cargo pilots who bid for April's cargo flights last month. There also is a "pay protection" clause in ALPA's collective-bargaining agreement in which senior pilots who are bumped in favor of junior pilots still could be paid.

The airline has argued that half of its pilots who had their bids on routes canceled as a result of the shutdown of the passenger flight operations are not qualified to fly Aloha's cargo flights because of the equipment used on those flights. Aloha also said that there is nothing in the collective-bargaining agreement that requires Aloha to re-bid flights based on seniority after they have initially been bid, even when other bids are canceled.

ALPA attorney Jim Lindsey said the key issue wasn't money but who's entitled to those jobs.

"It's not a bidding dispute," he said. "It's a massive furlough (from a total of 250 pilots) and who's entitled to the jobs."

"Aloha managed to avert another threat to its remaining operations yesterday when a dispute over legal fees threatened to derail its attempt to sell the cargo division. The unsecured creditors' committee objected to GMAC offering to pay the committee's attorneys $30,000 a week while Berger Singerman, the Miami-based law firm for Aloha, would receive $75,000 a week under a financing budget that will accompany the lender's loan to Aloha.

U.S. Bankruptcy Judge Lloyd King, referring to the legal maneuvering of the pilots' union, the company, and the professionals as "a game of chicken," said the amount GMAC was offering to pay the unsecured creditors' committee attorneys was "grossly disproportionate" to the amount earmarked for Berger Singerman.

Margery Bronster, one of the creditors' committee attorneys, said the dispute between GMAC and the committee wasn't about who got the most money.

"It's to give us the resources to do what we need to do for the committee, such as take depositions," she said.

GMAC offered to raise its fee for the unsecured creditors' committee to $40,000 a week, but King said that still wasn't enough and ordered GMAC to pay the creditors' committee $65,000 a week.

"My clients are freaking out with the amount of professional fees," said GMAC attorney Douglas Lipke, who then offered $50,000 a week.

Carole Neville, a mainland-based attorney for the committee, said the committee would accept that amount because she didn't want the squabble over money to "tank" the case.

King, who appeared irked over the lengthy dispute over professional fees, said that besides GMAC, Yucaipa, the court professionals and the U.S. Trustee, he doesn't see the money from the company's sales going to any other class of creditors.

King yesterday said the hope that the creditors' committee has expressed about restoring passenger service "would seem to be a long shot," then added, "but it would be wonderful if it was possible."